Domino’s Pizza sales thrive on ‘cocooning’ trend

Domino’s Pizza says it’s enjoying its strongest Australian sales in three years thanks to more people staying home on the couch.

Domino’s CEO Don Meij. Picture: Annette Dew

Domino’s Pizza says it is enjoying its strongest Australian store sales in three years thanks to the growing behavioural trend of “cocooning”, when people stay at home on the couch and binge on Netflix.

Chief executive Don Meij said high same-store sales growth had begun in December and continued through the bushfires season and into January.

Domino’s had been “enjoying great sales in the last two months’’.

“Eating in the home is a greater trend, binge watching with Netflix. That is a global trend in food delivery and the fastest growth part of our business is delivered food and that is not exclusive to Australia, I can point to Europe as well,’’ Mr Meij told The Australian.

He was speaking after Domino’s posted a 29.8 per cent rise in half-year net profit to $69.2m, as revenue for the half lifted 29 per cent to $905.8m.

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Shares in Domino’s shot up on the result, rising 15 per cent before closing up $6.24, or 10.86 per cent, at $63.70 — a three-year high. The stock has gained almost 50 per cent in the last year but is still down on its highs of around $75 in 2016.

Mr Meij said the Australian economy now, and the state of mind of consumers, was perfect for a food business like Domino’s.

“I think from a Domino’s customer perspective this is ‘make hay while the sun shines’, this is the perfect environment for us.

“We have a macro environment of people cocooning, we have got a willing desire for people to chase more delivery and we are the best at it, nobody delivers like Domino’s, we are the most efficient … the fact we are having our best sales in three years right now says a lot.’’

‘Cocooning’ at home on the couch is a growing trend that’s helping Domino’s.

The Domino’s group result was driven by its flagship Australian arm, which booked its strongest same-store sales in three years. Australian sales increased 3.5 per cent to $613.2m although there was a high rate of local pizza stores taken over by head office from franchisees, to revive and eventually return them to new owners.

“That is the way we operate the business; we will always recycle the bottom of the business (underperforming stores) and improve the business and sell it for a profit. So while it has a tension on our margins right now it recycles back into profit in the next 12 to 18 months. It is the right thing to do for our business.’’

The Australian arm was also hit by a decision to end a promotional $5 pizza deal that proved highly popular, and this deal returned in December. The combined Australian and New Zealand business posted more moderate earnings gains, up 1.7 per cent to $71.4m.

Domino’s, which also operates in Japan and Europe, increased global food sales by $151.3m to $1.58bn, up 10.6 per cent on the prior year, and 4.1 per cent on a same-store sales basis.

Mr Meij said Domino’s is now on track to pass $3bn in global food sales this financial year, with the company’s international operations delivering particularly strong sales and profitability growth in Europe, offsetting short-term domestic headwinds.

Online and delivery sales continued to be the largest contributors to growth in all markets. Online sales grew 18.8 per cent to $1.1bn, reaching and retaining new customers.

The overseas performance was supported by a record number of new store openings and strong store openings across the group, led by Japan (up 42 stores). France equalled the prior full-year opening rate with 12 new stores openings, contributing to 37 new stores opened in Europe.

In the first half Domino’s opened its 400th store in France, its first store in Luxembourg, and today operates 2607 stores in nine countries.

“We closed the last decade with more than 780 stores and $700m in total network sales,” Mr Meij said.

“We ended this decade with almost 2600 stores, $3bn in sales this year, and confidence the strategy that has delivered this performance will allow us to more than double our store count and network sales in the next decade.”

In Europe sales rose 9.4 per cent to €382m ($616m), as pre-tax earnings lifted 15.6 per cent to €29.4m.

Japan sales increased 12.2 per cent to 25.7bn yen ($350m), while pre-tax earnings rose 10.6 per cent to 2.8bn yen.

In a trading outlook, Domino’s said same-store sales growth in the first trading weeks of the second half rose 6.3 per cent, and for the financial year to date were up 4.6 per cent. Domino’s declared an interim dividend of 66.7 cents per share, up from 62.7 cents, to be paid on March 13.